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Shell's new Chukchi plan: Two rigs drilling wells at the same time

Yereth RosenAlaska Dispatch News
The Noble Discoverer prepares for its initial Chukchi Sea drilling operation in this view from the deck of the Tor Viking icebreaker September 8, 2012.

Two years after its ill-fated drilling season in Arctic waters off Alaska, Royal Dutch Shell on Thursday submitted a revised plan intended to show how oil exploration will go more smoothly the next time the company drills in the Chukchi Sea.

Shell submitted the plan to the U.S. Bureau of Ocean Energy Management, but has “made no formal decision” to carry out the drilling program, company spokeswoman Megan Baldino said.

 “We’ve put a plan forward in order to preserve our options for a 2015 season,” she said.

The newly revised plan, proposing two rigs drilling in the Chukchi instead of one, replaces a revised exploration plan that Shell submitted last November, Baldino said. That plan was itself a replacement for the plan that won regulators’ approval in 2011 and guided the 2012 activities.

In 2012, Shell had intended to drill up to three wells a year in the Chukchi for two years and up to two in the Beaufort for two years.

But the company was able to do only partial drilling on one well in the Chukchi and another well in the Beaufort, and it has not been back to the drilling theater since then. The 2012 season was beset with problems, including Shell’s inability to get a key oil-spill vessel up to U.S. Coast Guard standards, numerous permit violations and, most serious, the grounding of one of the two drill ships used in the program, the Kulluk. That drill ship was damaged beyond repair and could not be put back into service, Shell announced last year.

Plans for drilling in 2013 and 2014 were called off because of equipment and legal woes. Although Shell has spent about $5 billion on its offshore Alaska exploration program, it has yet to drill into any oil-bearing zones.

Shell’s new plan appears to seek to make up for lost drilling time.

 “We now plan to use two rigs in the Chukchi Sea at the same time,” Baldino said. “We’ve also bolstered the program with an anchor handler, new tugs and offshore supply vessels.”

The November plan called for Shell’s contracted drill ship, the Noble Discoverer, to be used for drilling wells in the Chukchi while a second contracted drill ship, the Polar Pioneer, would be on standby in Unalaska/Dutch Harbor to be available as a backup. The Department of Interior, under a policy adopted after the 2010 Deepwater Horizon disaster, has required Shell to have a backup rig available to drill a relief well in the event of a blowout. The Polar Pioneer substituted for the Kulluk in the plan submitted in November.

The new plan submitted to BOEM Thursday proposes that the Discoverer and Polar Pioneer work at the same time on exploration wells and act as each other’s relief-well backup, Baldino said. “Both would be drilling simultaneously,” she said.

The plan proposes an exploration program lasting “over several years,” with multiple drilling seasons, Baldino said.

Shell last year announced that it was putting Beaufort Sea ambitions on hold, and would focus on the Chukchi, believed to hold vaster oil reserves.

Before Shell embarks on any Chukchi drilling, permits from several agencies must be issued and legal issues in federal courts must be resolved.

No drilling will be allowed, according to a U.S. District Court order issued on April 24, until BOEM completes a new environmental study of exploration impacts to the Chukchi. The 9th Circuit Court of Appeals ruled in January that BOEM’s predecessor agency, the Minerals Management Service, had neglected to do proper studies before selling Chukchi leases to Shell and other companies in 2008, and that BOEM had perpetuated the problem by failing to correct the deficiencies. BOEM is in the process of drafting a supplemental environmental impact statement on Chukchi Sea leasing and expects to complete it in early 2015.

In a statement Thursday, BOEM said it will begin an informal review of the revised plan but, in accordance with the court rulings, will not launch its official review until the supplemental environmental impact statement is completed and approved with a record of decision. That is expected to happen in March, BOEM said. After that happens, BOEM said, the agency will start soliciting public comment on Shell's new exploration plan.

U.S. territory in the Chukchi Sea is believed to hold large quantities of untapped oil and gas. The most recent Interior Department analysis estimates that technically recoverable oil reserves total over 15 billion barrels, while technically recoverable natural gas reserves total over 76 trillion cubic feet.

Oil companies spent a record $2.66 billion in high bids for Chukchi exploration rights in the 2008 lease sale. Of that, over $2 billion came from Shell.

But the area, which separates Alaska from Siberia, is remote and forbidding. Vast distances from communities and established facilities like airports and harbors, along with harsh conditions that include drifting pack ice and bitterly cold weather, make operations costly. Prior to 2012, when Shell started drilling at a prospect it calls Burger, only five wells had been drilled in the Chukchi.

The area is also considered to be rich in natural resources, an important site for whales, walruses, polar bears and other wildlife. Environmentalists and some Alaska Native groups argue that the region, already vulnerable because of rapid Arctic climate change, should be spared further impacts that would occur with oil development. Drilling opponents cite risks of oil spills in an area -- and the limits of response capabilities in the challenging Arctic environment -- and industrial noise and some of the negative impacts of oil development.

Greenpeace, in a statement issued Thursday, said Shell’s new plan was unlikely to be better than the previous version.

“Shell clearly hasn't learned anything from its last Alaskan misadventure, which would have been funny had it not put lives, local communities, and a delicate ecosystem in grave peril. Shell is putting the pieces in place for next summer so it will at least appear competent to the administration, but anyone who has been paying attention knows that Shell is simply hoping the public and the U.S. government will confuse their commitment for competency,” John Deans, Greenpeace’s Arctic campaign specialist, said in the statement.

“The Dutch oil giant has bungled its way through its Arctic operations and squandered nearly $6 billion so far -- and all they have to show for it is a containment dome crushed like a beer can, a grounded drill rig, and a PR disaster. Even with all of the money they've spent, Shell hasn't been able to prove they can operate in the Arctic," Deans said.